v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
Note 11 – Income Taxes
The U.S. and foreign components of income (loss) before provision for (benefit from) income taxes for the years ended December 31, 2023, 2024, and 2025 are as follows (in millions):
Year Ended December 31,
202320242025
U.S.$1,525 $3,455 $4,620 
Foreign796 670 1,180 
Income before income taxes and income (loss) from equity method investments$2,321 $4,125 $5,800 
The components of the provision for (benefit from) income taxes for the years ended December 31, 2023, 2024, and 2025 are as follows (in millions):
Year Ended December 31,
202320242025
Current
Federal$1 $22 $164 
State16 42 116 
Foreign170 205 153 
Total current tax expense187 269 433 
Deferred
Federal11 (5,154)(118)
State12 (857)98 
Foreign3 (16)(4,759)
Total deferred tax expense (benefit)26 (6,027)(4,779)
Total provision for (benefit from) income taxes$213 $(5,758)$(4,346)
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2023 and 2024:
Year Ended December 31,
20232024
Federal statutory income tax rate21.0 %21.0 %
State income tax expense (1)
1.2 (19.8)
Foreign rate differential(0.4)(0.4)
Non-deductible expenses(0.2)2.2 
Stock-based compensation(1.9)(5.2)
Federal research and development credits(7.2)(5.1)
Deferred tax on investments
(3.5)— 
Entity restructuring
0.6 (0.5)
Change in unrecognized tax benefits
(6.8)37.8 
Valuation allowance (2)
(2.8)(164.3)
US effects on foreign operations4.1 (2.5)
Withholding taxes9.5 (0.1)
Other interest(4.1)(2.8)
Other, net(0.3)0.1 
Effective income tax rate9.2 %(139.6)%
(1) We reported the effects of the state valuation allowance on the state income tax expense line-item within our effective tax rate. In 2024, we released $1.2 billion of our valuation allowance on our U.S. state deferred tax assets, with the exception of our California R&D credits.
(2) In 2024, we released $5.2 billion of our valuation allowance on our U.S. federal deferred tax assets. This was included on the change in valuation allowance line-item.
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2025 (in millions):
Year Ended December 31, 2025
Federal statutory income tax rate$1,218 21.0 %
State and local income taxes, net of federal income tax effect (1)
156 2.7 
Federal
Changes in valuation allowances(14)(0.2)
Effect of cross-border tax laws
Foreign-derived intangible income(73)(1.3)
Global intangible low-taxed income107 1.8 
Other26 0.4 
Tax credits
Foreign tax credits(173)(3.0)
Research and development credits(55)(0.9)
Other(2)— 
Nontaxable or nondeductible items
Excess tax benefits on share-based payments(216)(3.7)
Stock based compensation90 1.6 
Other31 0.5 
Other adjustments
Capitalized research and development expenses(338)(5.8)
Loss on subsidiary stock(620)(10.7)
Capital loss on debt instrument(285)(4.9)
Other(34)(0.6)
Foreign tax effects
Netherlands
Changes in valuation allowances(2)
(5,011)(86.4)
Other74 1.3 
Brazil
Withholding tax expense128 2.2 
Other(2)— 
India
Changes in valuation allowances88 1.5 
Other(47)(0.8)
Other foreign jurisdictions16 0.3 
Worldwide changes in unrecognized tax benefits590 10.2 
Effective income tax rate$(4,346)(74.8)%
(1) In 2025, the states that contributed to the majority (greater than 50%) of the tax effect in this category are Florida, Illinois, and New Jersey.
(2) In 2025, we released $5.0 billion of our valuation allowance on our Netherlands' deferred tax assets.
The following is the cash paid for income taxes for the year ended December 31, 2025 (in millions):
Year Ended December 31, 2025
US federal$12 
US state and local81 
Foreign252 
Total income taxes paid, net of refunds$345 
The components of deferred tax assets and liabilities as of December 31, 2024 and 2025 are as follows (in millions):
As of December 31,
20242025
Deferred tax assets
Net operating loss carryforwards$4,319 $3,177 
Research and development credits1,539 1,641 
Stock-based compensation71 122 
Accruals and reserves730 1,297 
Accrued legal221 234 
Fixed assets and intangible assets (1)
3,226 2,938 
Lease liability391 367 
Interest limitation carryforwards760 657 
Capitalized research expenses (1)
1,591 2,175 
Other381 307 
Total deferred tax assets13,229 12,915 
Less: Valuation allowance(6,267)(1,312)
Total deferred tax assets, net of valuation allowance6,962 11,603 
Deferred tax liabilities
Investments515 418 
Right-of-use assets270 253 
Other14 9 
Total deferred tax liabilities799 680 
Net deferred tax assets (liabilities)$6,163 $10,923 
(1) Prior period amounts have been reclassified to conform to the current period presentation. Certain deferred tax assets in Fixed Assets and Intangibles were reclassified to Capitalized Research Expenses.
The income tax benefit was $4.3 billion for the year ended December 31, 2025, which includes a $5.0 billion benefit related to the release of our valuation allowance on the Netherlands’ deferred tax assets, offset by tax expense on our earnings.
We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of all available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will be realized.
Based on all available positive and negative evidence, we continue to maintain a valuation allowance against the California R&D credits, as we believe it is not more-likely-than-not to be realized, as we expect R&D tax credit generation to exceed our ability to use these credits in future periods.
In evaluating the recoverability of these deferred tax assets, we considered all available evidence, both positive and negative. As of December 31, 2025, we were in a 12-quarter cumulative income position based on the Netherlands’ pre-tax book income adjusted for permanent book-to-tax differences. The 12-quarter cumulative income position is considered significant positive evidence that is both objective and verifiable. The historical income position provides us evidence to place greater reliance on projections of future profit as a source of income. Furthermore, current-year profitability and corresponding positive taxable income in the Netherlands, along with projections of future profit, provides strong positive evidence for the realization of our deferred tax assets in the Netherlands.
Based on all available evidence, including the objective and verifiable positive evidence as described above and anticipated future earnings, we concluded it is more-likely-than-not that our Netherlands’ deferred tax assets will be realizable. Accordingly, we released $5.0 billion of our Netherlands valuation allowance during the year ended December 31, 2025. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The legislation includes significant provisions, such as permanent extensions and modifications of certain provisions of the Tax Cuts and Jobs Act and modifications to the U.S. international tax system. The OBBBA contains multiple effective dates, with certain provisions taking effect in 2025 and 2026. We have evaluated the OBBBA enacted during the year and included its impact within our 2025 financial statements. We will continue to evaluate the future impacts of these legislative changes as additional supplemental guidance becomes available.
As of December 31, 2025, we had U.S. federal net operating loss carryforwards of $43 million that begin to expire in 2031 and $4.1 billion that have an unlimited carryover period. As of December 31, 2025, we had U.S. state net operating loss carryforwards of $7.0 billion, including $6.0 billion with limited carryforward periods, an immaterial portion of which will expire beginning with the 2025 tax year if not utilized. The remaining $1.0 billion have an unlimited carryover period. As of December 31, 2025, we had foreign net operating loss carryforwards of $20.3 billion, including $961 million with limited carryforward periods, an immaterial portion of which will expire beginning with the 2025 tax year if not utilized. The remaining $19.3 billion have an unlimited carryover period.
As of December 31, 2025, we had U.S. federal research tax credit carryforwards of $1.2 billion that begin to expire in 2037. We had U.S. state research tax credit carryforwards of $848 million that have an unlimited carryover period.
In the event we experience an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”), our ability to utilize net operating losses, tax credits and other tax attributes may be limited. The most recent analysis of our historical ownership changes was completed through December 31, 2025. Based on the analysis, we do not anticipate a current limitation on the tax attributes.
The following table reflects changes in gross unrecognized tax benefits (in millions):
Year Ended December 31,
202320242025
Unrecognized tax benefits at beginning of year$3,513 $3,345 $4,937 
Gross increases - current year tax positions177 201 693 
Gross increases - prior year tax positions (1)
42 1,437 13 
Gross decreases - prior year tax positions(315)(37)(26)
Gross decreases - settlements with tax authorities— (6)(5)
Gross decreases - lapse of statute of limitations(72)(3)(1)
Unrecognized tax benefits at end of year$3,345 $4,937 $5,611 
(1) In 2024, new information became available that required a remeasurement of a prior year transfer pricing tax position resulting in an overall reduction in our net deferred tax assets of $1.2 billion, which was fully offset by a change in the valuation allowance. This is reflected in the increases to prior year uncertain tax positions above.
As of December 31, 2025, approximately $5.1 billion of unrecognized tax benefits, if recognized, would impact the effective tax rate. The remaining $515 million of the unrecognized tax benefits would not impact the effective tax rate due to the valuation allowance against certain deferred tax assets.
We recognize accrued interest and penalties related to unrecognized tax benefits within the provision for income taxes in the consolidated statements of operations. As of December 31, 2024 and 2025, the amount of interest and penalties accrued was $17 million and $17 million, respectively.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. We are also under various state and other foreign income tax examinations. We believe that adequate amounts have been reserved in these jurisdictions. To the extent we have tax
attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state or foreign tax authorities to the extent utilized in a future period.
As of December 31, 2025, the open tax years for our major tax jurisdictions are as follows:
JurisdictionTax Years
U.S. Federal2013 - 2025
U.S. States2007 - 2025
Australia2019 - 2025
Netherlands2019 - 2025
United Kingdom2022 - 2025
As of December 31, 2025, the amount of unrecognized deferred tax liability on the undistributed earnings from certain foreign subsidiaries that we intend to indefinitely reinvest is not material.